The Difference between Australian and Saudi Arabian regimes in dealing with anti-competitive actions in telecommunication sector

A prosecution in 388 BC, resulting from an incident in Greece, was the first trial that confronted unfair trading activity resulting from the adoption of anti-trust methods to affect the market balance by eliminating or destroying competitors. This brought to the attention of the lawyers of that day the potential dangers inherent in commercial conduct.[1]  The Greek incident occurred when a group of grain merchants stored goods for a while and spread rumours about an expected shortage in grain supply, and also the probable chance of war. As a result, the traders made an unreasonable profit arising from the increased selling price of the grain due to the panic they created among the people.  In consequence, the authorities arrested the merchants for causing an imbalance in the market, together with other charges. They were put on trial, and were found guilty as accused.[2]

It now appears that it is, in fact, an advantage to have a competitive environment in almost any market provided it is monitored and controlled by an authority. It is helpful to have some rivalry, as it makes any commercial sector function better, as pointed out by Richard R. Nelson and Sidney G. Winter, who state that ‘one function of competition, in the structural sense of many firms, then would be to make possible that diversity. Another function... is to reward and enhance the choices that prove good in practice and to suppress the bad ones.’[3]  However, there is a significant need for an authority to regulate competition, and to guarantee that no anti-competitive conduct arises to obstruct the natural rivalry, and thereby to provide an attractive and healthy trading environment.

Rivalry between companies in the telecommunication sector is almost always fierce, if one considers the frequent transitions and the intensely complicated character of this kind of market.[4]  Therefore, it might be seen as unfair conduct should one party act against its competitors by demanding that the authority issue a restriction order in order to terminate their competitive conduct. However, there must be a clear definition of those behaviours that are regarded as being contrary to normal competitive activity, otherwise, unjust procedures could be conducted that might cost telecommunication firms huge losses of money through cancelling of activities that were really quite acceptable.[5] Moreover, the reputation of a particular country’s market, as regards its telecommunication segment, may suffer through its apparent failure to provide an environment of ‘economic efficiency’ to potential future entrants into the market.[6]

In Australia, although there is a commission that administers telecommunication services together with broadcasting, the Australian Communication and Media Authority (ACMA), the Australian government has delegated the monitoring of competitive activities in the telecommunication sector to the Australian Competition and Consumer Commission (ACCC). The role of this commission is to regulate and promote competition throughout Australian markets. However, in Saudi Arabia there is only one commission, established in 2001, and this is the only authority responsible for all issues in the telecommunications section, including competition. This body is called the Communication and Information Technology Commission (CITC).

Significant information can be obtained by studying the competition regulation systems of both Australia and Saudi. This information could  help to improve existing regimes and could point out weaknesses in their current approach to the remedying of anti-trust behavior. However, it is important to notice that there is very little recorded history for competition in the telecommunication sector, and due to a general failure to publish legal cases in Saudi Arabia, there is a lack of reported lawsuits which could guide this research.

v  The Determination of Anti-Competitive Conduct

In order to reach a reasonable conclusion about the means both regimes are adopting in resolving anti-trust disputes, it is necessary to present how anti-competitive conduct is defined by both Australia and Saudi Arabia.  As result, I intended to start this paper with a brief preface of each country’s view of competition and what constitutes misconduct in this area.  Furthermore, to provide a broader understanding of the general similarities and differences, I will compare and contrast their definitions in relation to market power, restrictions upon domination, and exception orders.  

Ø Australian Attitude

The Australian telecommunication regulations regarding competition are located in the Competition and Consumer Act, 2010 (Cth) and found in two parts: the general rules of competition are located in part IV,  while the detection and deterrence of anti-trust behaviours that a telecom firm might conduct, are found in section XIB.  The Australian Competition and Consumer Commission (ACCC) was established to put part XIB into practice. This has made it a faster and more efficient process, allowing Australia to avoid struggling with situations that other countries, such as Saudi Arabia, are now doing.  The number of telecom companies has increased in both countries, which obviously has increased the burden on the relevant authority.  However, the ACCC has the power to investigate alleged misconduct, to make rulings, to issue competition notices, to chastise firms for wrongdoing and to bring lawsuits against any party guilty of misconduct.[7] 

It appears that the tool that is relied upon to fulfil the definition of anti-trust conduct is a controversial issue in the Australian telecommunication industry, because it includes two different approaches to determining what an anti-competitive act is. First, as stated in section 151AJ of Part XIB of the Competition and Consumer Act 2010 (Cth), the behaviour of a service provider is regarded as anti-competitive if it:

(a) has a substantial degree of power in a telecommunications market; and

 (b) either:

                              (i) takes advantage of that power in that, or any other, market with the effect, or likely effect, of substantially lessening competition in that or any other telecommunications market; or

                              (ii) takes advantage of that power in that or any other market, and engages in other conduct on one or more occasions, with the combined effect, or likely combined effect, of substantially lessening competition in that or any other telecommunications market.[8]

However, there is another, more detailed, definition of anti-trust conduct given in section 46, under Part IV. This provides another way of probing anti-rival behaviour and states that:

 ‘a corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of…’ excluding a competitor from getting into the market, preventing or stopping rival activities, or destroying or lessening the ability of a competitor.[9]

As a result of the dual definition to be applied when figuring out what constitutes anti-competitive conduct, there are considerable discussions in Australia, about which approach should be used when investigating whether a particular company has breached the competition rules through anti-trust conduct.  Two systems must be chosen between in this context: A test investigating ‘purpose’ under section 46 of Part IV, or the ‘effect or likely effect’ of the behaviour as indicated in Part XIB.

The telecom firms Talstra, Ericsson, R. S. Gilbert and the Institute of Public Affairs all called for the abolishment of Part XIB.[10]  However, other contributors suggested keeping that part, while some of them preferred that it should be the one to be employed.[11]  The ACCC currently uses Part XIB only in the telecommunication sector, when determining whether alleged anti-competitive conduct really is, or not. The commission is required to issue a competition notice to the firm in violation before going ahead with prosecution.[12]  Therefore, the ACCC must apply the effect test on the alleged misconduct, which the ACCC itself prefers rather than the purpose test, because ‘in the absence of “smoking gun”, it is generally easier to prove effect than intent, as a firm can obscure its intent’.[13] The Commission is required to follow three distinct stages before issuing a competition notice, which are; the Preliminary phase where they search for the cause of the suspicion; the Investigation stage, and the Ruling, once they have found credible reason.[14]

Ø  Saudi Arabian Attitude

In Saudi Arabia, where the government regime is very different from that in Australia, the law of competition is laid down in two legislative acts: A royal decree creates the primary source of regulation, which is named the Telecom Act, and then a ministerial order follows, that is named the Telecom Act Bylaws. Generic rules mentioned in the Act are detailed in the Bylaws; therefore, my focus will be on the Bylaws as I discuss the Saudi Arabian anti-trust law as it relates to telecommunication. However, I will start with the duties of the Saudi Communication and Information Technology Commission (CITC) in relation to competition matters. The commission is responsible for improving competition rules so that benefits are gained from it, and for providing a ‘transparent regulatory framework’ in order to facilitate regulations in local markets, through making decisions in disputes, through rivalry surveillance, by banning any anti-competitive activities, by identifying ‘dominant’ parties, and by administering mergers, and by resolving problems between competitive firms.[15]

Anti-competitive conduct is defined under Article 31 of the Telecom Act Bylaws as ‘abuse of dominance’. This would include: the failure to provide essential facilities to a rival company within a reasonable period and on reasonable terms and conditions; unjustified discrimination against competitors when providing any service; requesting competitors to acquire things they do not need or asking for an unreasonable price in exchange for providing services; being aggressive by acquiring facilities with the intention of preventing other competitors from having them; offering lower prices over the long term or establishing pricing standards without the commission’s permission; ‘cross-subsidizing’ from one service to a competitive one in such a way as to eliminate or affect other the parties; failure to observe the interconnection obligations of a dominant service provider; or any behaviour that relates to the pricing, refusal of service provision; the adoption of unsuitable network specifications to negatively affect the other parties; failure to provide certain information that is needed by the competitor;  and misuse of the rival’s data acquired from interconnection or other services.[16]  The final provision of the Article gives authority to the commission to judge any conduct that the CITC believes is against competition rules, in accordance with Article 32.[17]

The dominant party is defined in Article 30 as ‘every service provider that earns forty per cent (40%) or more of the gross revenues in a specific telecommunications market...’[18] Nevertheless, the Article gives the right, under certain conditions, to the CITC to classify any firm as a dominant provider even though they do not own 40% of the market.[19] The commission must publish in its website the names of dominant firms and the specific sector of the market in which they are active.[20]

In Article 32 another definition of anti-trust is provided, and this provides the regulations that all competitors, both dominant and non-dominant, must comply with.  These regulations state that:

No person shall engage in a practice restricting or distorting competition in the telecommunications markets, including the following:

a) arrangements between two or more service providers that directly or indirectly fix the prices or other terms or conditions of service in telecommunications markets;

b) arrangements between two or more service providers that directly or indirectly determine which person will win a contract or business opportunity in a telecommunications market; and

c) arrangements between two or more service providers to apportion share or allocate telecommunications markets among themselves or other service providers. [21]

The commission, as invalid, will regard any deals that violate these competition rules.

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[1] Alex Bruce, Restrictive Trade Practice Law (LexisNexis Butterworths, 2010) 1.4.

[2] Ibid.

[3] Richard R. Nelson and Sidney G. Winter, An Evolutionary Theory of Economic Change (Belknap Press, 1982) 276.

[4] Explanatory Memorandum, Trade Practice Amendment (Telecommunications) Bill 1996, 6.

[5] Productivity Commission, Telecommunication Competition Regulation, Inquiry Report No. 16 (2001) 154.

[6] The Independent Committee of Inquiry, National Competition Policy Review, Hilmer Report (1993) 6.

[7] Productivity Commission, Telecommunication Competition Regulation, Inquiry Report No. 16 (2001) 190.

[8] Competition and Consumer Act 2010 (Cth) s 151AJ (2).

[9] Competition and Consumer Act 2010 (Cth) s 46 (1).

[10] Productivity Commission, Telecommunication Competition Regulation, Inquiry Report No. 16 (2001) 152.

[11] Ibid.

[12] Competition and Consumer Act 2010 (Cth) s 151AKA(1-2).

[13] Productivity Commission, Telecommunication Competition Regulation, Inquiry Report No. 16 (2001) 179.

[14] Ibid 194.

[15] Telecom Act Bylaws (Kingdome of Saudi Arabia) Minister of Post, Telegraph and Telephone Resolution, Act 11 of 27/072002, contained in page 35, art 29 on  <http://www.citc.gov.sa/English/RulesandSystems/Bylaws/Documents/LA_005_%20E_Telecom%20Act%20Bylaws.pdf> .

[16] Ibid 37-38, art 31.

[17] Ibid.

[18] Ibid 35, 30.1.

[19] Ibid 36, 30.2.

[20] Ibid.

[21] Telecom Act (Kingdom of Saudi Arabia) Council of Ministers Resolution, No. 74, 27/05/2001, 8, Ch6 (art 24) on <http://www.citc.gov.sa/English/RulesandSystems/CITCSyste/Documents/LA%20_001_E_%20Telecom%20Act%20English.pdf >.